Even I’m Getting Nervous

The AI Spending Debate [00:00:00]

• A common argument suggests AI spending is "recycled capex," with money flowing between tech companies without fundamental economic expansion.
• This perspective questions where new revenues are generated, leading to fears of an AI bubble.

  "in other words uh google takes some cash flow spends a hundred billion dollars on chips that goes into nvidia nvidia spends that on some neoclouds as an investment into those neoclouds they go buy some more chips for nvidia which gives nvidia more money to go invest in another company and that other company invests in an ai startup and they hire jobs over there and everything kind of gets recycled"

Challenging the Bear Narrative [00:01:45]

• Companies like Oracle and Nubis, often cited as examples of AI bubble risks, are showing improved financial health.
• Oracle's net income has risen, and its margins are stable, indicating it's not on the brink of default.
• Nubis, despite operational losses due to chip write-offs, is profitable when depreciation is added back.

  "so if we add back in depreciation the company nebius is actually profitable"

The Depreciation Cliff Myth [00:03:30]

• The idea of a "depreciation cliff" for AI chips is premature, as older chips are becoming more valuable.
• Six-and-a-half-year-old NVIDIA A100 chips are seeing rising rental rates, contrary to expectations of declining value.
• This trend is attributed to the practical utility of agentic AI and open-weight models.

  "a six and a half year old chip is seeing its rental rates rise in 2026 that is unusual"

Agentic AI's Impact on Labor [00:05:00]

• Agentic AI has recently become powerful enough to impact jobs, a capability it lacked in previous years.
• This is a stark contrast to the belief that if AI were to take jobs, it would have already happened.
• The increasing productivity from agentic AI is a concern for the labor market.

  "ai just became capable of taking jobs and so somebody told me and at the end of this yahoo finance interview they said well i think if ai was going to take people's jobs it would have already"

SpaceX and AI Build-Out [00:06:30]

• SpaceX is experiencing a significant increase in revenue from renting out its chips, indicating high demand for AI infrastructure.
• Prepayment deposits have risen substantially, showing hyperscalers are actively investing in AI build-outs.

  "spacex literally their super intelligence revenue just essentially 3x from renting out their chips"

Rising Rental Rates for Older Chips [00:08:00]

• Rental rates for older chips, including the H100 (four years old) and GB200 (two-and-a-half years old), are increasing.
• This defies the normal depreciation curve and suggests strong demand for AI computing power.
• ASML's exploding backlog for chip-making machines further indicates an acceleration, not a slowdown, in AI build-out.

  "rental rates for gb200 frontier blackwell chips not even the gb300s or the vera rubens are up 39 from the end of 2025"

The Real Canary in the Coal Mine: Unemployment [00:11:00]

• The most significant economic warning is the rising unemployment rate, particularly the fastest increase in the Black unemployment rate since 2012.
• This trend is often an early signal of broader economic trouble.

  "generally when the unemployment rate rises for black workers it can be an early signal of trouble for everyone"

Labor Market Weakness and Layoffs [00:13:00]

• Recent layoffs at Netflix and eBay, alongside a general concern about the labor market's ability to absorb job losses, are worrying signs.
• AI's impact on labor productivity is expected to skyrocket, potentially exacerbating job losses.
• Research suggests the labor market is shakier than headline numbers indicate, with pain in professional and business services.

  "i think the labor market is actually shakier than the headline numbers suggest"

Future Economic Outlook and AI's Role [00:16:00]

• The speaker believes the Federal Reserve may only implement one more rate hike due to an uncertain labor market and stable inflation expectations.
• AI's increasing capability to perform tasks like bookkeeping, graphic design, and video editing poses a significant risk to many jobs.
• Despite short-term labor market concerns, the speaker remains bullish on the stock market for the next year, anticipating a rally driven by AI, before a potential future downturn as labor market data deteriorates.

  "i think most just haven't realized the potential yet and that's why part of the reinvest terminal launch will include agentic ai for businesses"